Graham Vick, founder and artistic director of Birmingham Opera Company, said last night that he was "bewildered" by the Arts Council's plans to stop funding the company.

Speaking from Venice, Mr Vick said: "Why on earth we can't just be proud of achievements in Britain I just don't know.

"Why do we have to have this reaction of cutting people down to size? After 20 years of sustained achievement, after the last five years of balancing the books each year and the triumph of La Traviata, what is going on?

"Sometimes I'm made to feel a problem because I want to do these interesting things. But that's why we exist."

Mr Vick is currently directing a production of Puccini's La Rondine to launch the new season at La Fenice, Venice's 18th century opera house. The production celebrates his 25th anniversary working at the historic venue.

One of the world's most sought-after opera directors, he works regularly at leading international venues like the Metropolitan in New York and La Scala in Milan as well as Covent Garden, where his production of Verdi's Falstaff relaunched the Royal Opera House following its lottery-funded rebuild.

He said that people in the international opera world were incredulous that the Arts Council was planning to stop supporting the Birmingham company, which has attracted international attention for its innovative way of working with the community. "We are built on a model they [the Arts Council] don't like. They say 'Do a business plan like this.' And then in all the discussions about this there's the one sentence, 'Of course, the work you do is fantastic...'

"We have developed a practical model which is being looked at all over the world. At the moment I am setting up a project in San Francisco where we are going to do Fidelio at Alcatraz.

"We are a research and development company. There's almost no existing model for what we do. When we had an Arts Council review in 2003 our funding was increased on the basis of our being a research and development company, going into the unknown. It means taking risks, but we take those risks informed by very experienced people. We take risks that we understand and we calculate carefully.

"It's outrageous that people casually insult us like this. I have sat on committees for the Arts Council as an expert on opera, but we are answerable to people who have never been employees of an opera company. We take risks very seriously - it's [general manger] Jean Nicholson's job, its my reputation. We have more to lose than anybody else."

Mr Vick said that the arm's-length principle intended to keep funding from state interference had been eroded because the Art Council had effectively become a state in its own right.

"There has been no threat of withdrawing funding, but for about three years they have been nagging us about what they call 'third-stream' funding, which is meant to be sponsorship.

"The real cost of Traviata, if we paid real costs and paid everybody properly, we have worked out would have come out at over £2m. We spent something over £600,000, so there was effectively £1.5m of hidden subsidy. That's what we see as third-stream funding, but to see that requires a bit of vision and generosity of spirit.

"We were grateful for the uplift four years ago and now they want to take the money away from us."

A short history of Birmingham opera companyOriginally the Cambridge Opera Group, set up by fellow students Graham Vick and Simon Halsey (now chorus director of the CBSO) the company became English Touring Opera (not to be confused with the present company of that name), which toured scaled-down productions around the country.

In the 1980s it merged with Cannon Hill Music Theatre and made its home in Birmingham, continuing to premiere productions in community venues in the city before touring nationally. Highlights at this time included an award-winning Ring cycle and Ghanashyam, a music-dance drama specially commissioned from Ravi Shankar.

In 2001 the company reviewed its way of working and abandoned national touring, instead producing one major project a year in which a community cast performs alongside professional singers in an unconventional venue.

Examples include Beethoven's Fidelio, performed in a tent in Aston Park, Bernstein's Candide, in a since-demolished factory in Eastside, and Don Giovanni in the former Municipal Bank on Broad Street.

Fidelio featured in a South Bank Show documentary and was broadcast live on BBC television. It also won the South Bank Show Award.

The Marriage of Figaro, staged in a country house with the Orchestra of the Age of Enlightenment, was also broadcast live on television, in four instalments corresponding to the various times of day in the opera.

A television film was made of Curlew River, staged at the Proms in 2004 with Birmingham Contemporary Music Group. Several productions have been nominated for Royal Philharmonic Society Awards - the Oscars of the British classical music world.